Employers Turn 'Cautious' On Hiring As Vacancies Fall To Lowest Level Since 2021

Joanne Frew

Overall, the headline figures point to a broadly stable labour market, with little movement in employment and mixed signals on unemployment trends. The UK employment rate was estimated at 75% in the period February to April 2026. This is largely unchanged on both the year and in the latest quarter. The UK unemployment rate was estimated at 4.9% in the same period. This is an increase of 0.3% on the year, but a decrease of 0.3% in the latest quarter. Taken together, the data suggests a labour market that remains steady, with a modest year‑on‑year increase in unemployment but some improvement in the most recent quarter.

Vacancy estimates decreased in the latest quarter, with early estimates for March to May 2026 suggesting a decrease of 19,000 vacancies to 707,000, compared with December 2025 to February 2026 – this is the lowest level since February to April 2021. The latest data suggests employers are taking a more measured approach to hiring, reflecting ongoing uncertainty in both the economic outlook and the evolving legislative landscape, with vacancy levels continuing to act as a useful barometer of changing business confidence.

Annual growth in employees’ average earnings in Great Britain was 3.4% for regular earnings (excluding bonuses), and 4.4% for total earnings (including bonuses) in February to April 2026. This cooling reflects a more cautious labour market backdrop, with employers balancing ongoing cost pressures, including the higher National Living Wage, against a slightly reduced demand for labour. As a result, while pay growth remains positive, the scope for significant wage increases appears increasingly constrained as businesses look to manage costs throughout the remainder of 2026.

Inflation remains at 2.8%, pointing to a more settled but still elevated economic backdrop, while the Employment Rights Act 2025 continues to be implemented in stages, with further reforms expected in October 2026. Together, these factors are likely to keep pressure on margins and reinforce a more disciplined approach to workforce investment and reward over the months ahead. Looking ahead, seasonal demand linked to the summer sporting calendar, including the World Cup, may provide a modest short‑term uplift in hiring in sectors such as hospitality, which should become more visible in labour market data over the coming months. More broadly, speculation around future political leadership may add a further layer of uncertainty for employers already operating in a shifting economic and regulatory environment.